The National Retirement Risk Index

The National Retirement Risk Index (NRRI) measures whether Americans will be able to maintain the same standard of living they enjoy today after they retire. When it was updated for 2012, the index showed the number of "at risk" households had increased by nine percentage points - from 44 percent to 53 percent - between 2007 and 2010. In its explanatory comments the Center for Retirement Research at Boston College (the group that compiles the index) attributed the change to the combined effects of the financial crisis, poor investment returns, low interest rates, and the continuing rise in Social Security's full retirement age.

Americans are not unaware of the situation. The 2012 Retirement Confidence Survey found almost one-half of working Americans are 'not too' or 'not at all' confident they'll have enough money to live comfortably throughout retirement. If you fall into either of these categories - and even if you don't - it's important to evaluate your current retirement plan in light of key risks that may influence its effectiveness. These include:

• Longevity risk. A recent headline suggested that 72 is the new 30. The scientists who made the determination meant that modern man, at age 72, has the same chance of dying as primitive man did at age 30. That makes longevity risk - the chance you'll outlive your savings - an essential consideration when planning for retirement. One way to address longevity risk is by developing a retirement income plan that will allow you to generate income for as many years as you may need it.

• Inflation risk is the chance your savings and investment will grow more slowly than inflation, reducing your purchasing power. For example, a gallon of milk that cost about $2.00 in 1990 would have set you back $3.50 in 2012 - and that was after a period of relatively low inflation. One way to address inflation risk is to consider investing in a well-allocated and well-diversified portfolio that may have the potential to outperform inflation over time.

If you have any questions about saving for retirement, or would like to review your retirement plan, please give us a call.

Weekly Focus - Think About It

When planning for a year, plant corn. When planning for a decade, plant trees. When planning for life, train and educate people.

--Chinese proverb

The rest of the report can be found here.

Please be sure to visit the Parks Wealth Management website at www.parkswm.com.

Best regards,

James T. Parks, CFP®, AEP, AIF
President and Wealth Advisor

Parks Wealth Management
216 East Ridgewood Ave., 2nd Floor  |  201-689-2020